Pat has a dependent daughter and files as head of household.She has AGI of $375,000.What percentage of the $3,900 personal exemption and $3,900 dependencey exemption may she deduct on her 2013 income tax return?

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Quizplus · Accepted Answer

Taxpayers who file as head of household with an AGI above a certain amount ($313,800 for 2013) will have their exemptions phased out. For every $2,500 of AGI over the threshold, the exemptions will be reduced by 2%. Therefore, with an AGI of $375,000, Pat's exemptions are reduced by 24% (($375,000 - $313,800)/$2,500 x 2%) which means she can only deduct 76% of the exemptions. Therefore, she can deduct 76% of $3,900 for the personal exemption and 76% of $3,900 for the dependency exemption, which equals $2,964 for each exemption. Finally, she can deduct 20% of these amounts, since that is the tax rate for her income level, which results in a deduction of $593 for each exemption. Therefore, she can deduct a total of $1,186 ($593 x 2) for the exemptions.

Pat Has a Dependent Daughter and Files as Head of Household.She